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medical debt

By Chandler Sullivan
August 1, 2023 | 6 Min. Read

Medical debt is a concerning financial situation faced by many individuals and families. Unexpected medical expenses can lead to substantial financial strain, impacting credit scores and overall financial well-being (and health).

In this blog, we will investigate the world of medical debt, exploring its definition, causes, consequences, and potential solutions for managing this financial burden.

Medical debt refers to the unpaid balances resulting from medical expenses when seeking healthcare services. These expenses may include hospital stays, surgeries, doctor’s visits, prescription medications, medical equipment, and other healthcare-related costs.

Medical debt can accumulate when individuals do not have health insurance coverage or when out-of-pocket costs are high, even for insured patients. In fact, 50% of Americans carry medical debt, and in 2016 medical debt was estimated to be $81 billion but a recently published study says it is now closer to $140 billion!

The leading cause of medical debt is often the lack of health insurance or inadequate insurance coverage. When individuals are underinsured or do not have insurance at all, they are more likely to bear the full burden of medical expenses, leading to the accumulation of medical debt.

Here is a breakdown of several factors that can contribute to medical debt:

Individuals without health insurance coverage are more susceptible to medical debt, as they must bear the full cost of medical services.

Even with health insurance, high deductibles, and co-pays can create significant out-of-pocket expenses for patients.

Medical debt often arises from unforeseen accidents or health emergencies that require immediate medical attention.

Loss of employment or reduced income can make it challenging to meet medical expenses, leading to medical debt accumulation.

The fact of the matter is unrealistic expectations are placed on patients to pay a certain percentage of their medical debt or else they get sent to collections. This then creates a cycle of potentially damaging credit scores which means less access to financial tools and a decrease in wealth and financial stability.

The result of this often ends up with people losing motivation to try and improve their circumstances, they give up, and they try to avoid their medical problems at all costs to avoid more medical debt. And this is dangerous!

When faced with medical debt, taking proactive steps to manage and address the financial burden is essential. Here are some prevention and management tips to consider:

Examine medical bills carefully to ensure accuracy and verify that all services were received. Mistakes can occur, leading to inflated charges or erroneous billing.

If the medical debt is beyond your current means, consider negotiating a payment plan with the healthcare provider. Many providers will work with patients to set up manageable repayment terms.

Some medical facilities offer financial assistance programs for needy patients. Research available assistance options, such as charity care or financial aid, which can alleviate the burden of medical debt.

Some organizations specialize in helping individuals negotiate and reduce medical debt. Engaging with such services can lead to more favorable debt settlement terms.

Watch out for services that charge excessive fees without providing debt relief. Verify that the credit counseling service (also known as an adjustment service provider) you choose to deal with has a license from the Wisconsin Department of Financial Institutions.

Although enticing, this is not a wise move. Paying a bill late can damage your credit. If you call a provider right away, they could be willing to work with you on smaller payment plans.

Avoiding the doctor can be a potentially dangerous option. Find a Primary Care Physician and make annual physicals a priority. These are appointments that are covered 100% by insurance. Make it clear with your PCP that anything that will cost you extra you want to know about and approve before service takes place.

Call 211 or visit

Learn about Free Hospitals and Charity Care in Wisconsin. Go to

Before trying to understand how health insurance plays into your medical debt, ask yourself these questions:

  • Do you have insurance?
  • Who are your in-network providers?
  • Do you have a co-pay?
  • What is your deductible?
  • What is your co-insurance?
  • What is your maximum out-of-pocket?

It is important to have health insurance, so you aren’t stuck with paying for all your medical bills out of pocket and continuing the cycle of debt. We understand that not everyone can afford health insurance but at the very minimum, you should consider alternative resources to help reduce the cost of healthcare.

Here are some important terms to understand about health insurance:

Whether a provider accepts your health insurance or not.

Flat fee that you pay on the spot each time you go to your doctor or fill an Rx.

The amount you pay for health care services before your health insurance begins to pay.

A percentage of a medical charge that you pay, with the rest paid by your health insurance plan.

The most you must pay for covered services in a plan year.

Yes, medical bills can impact your credit. In the past, unpaid medical bills were reported to credit bureaus and could negatively affect credit scores. However, in recent years, there have been changes in credit reporting practices.

Now, there is a 180-day grace period before medical debt is reported to credit bureaus. This grace period allows more time for insurance processing and dispute resolution, potentially preventing immediate credit score impact from medical bills.

It is also important not to move your debt to a credit card. The interest rates on your credit card are high and they’ll add a lot more to how much you pay. Medical debt on a credit card may no longer count as medical debt.

Failure to address medical debt can have severe consequences, including:

Unpaid medical debt may be handed over to debt collection agencies, resulting in increased stress and collection efforts.

Medical debt can negatively impact your credit score, making it harder to obtain credit in the future.

In extreme cases, medical providers may pursue legal action to recover unpaid debts.

To ensure your protection, make sure you know your rights when it comes to medical bills and collections. The Consumer Financial Protection Bureau is on your side to make sure you are treated fairly. For more information visit:

Spousal responsibility for medical debt varies depending on state laws and whether the medical debt is considered a joint debt. In community property states, both spouses may be responsible for certain types of medical debt incurred during the marriage.In non-community property states, one spouse may not be legally responsible for the other’s medical debt unless they co-signed or agreed to share the debt.

Wisconsin’s Marital Property Law states that each spouse is personally liable for these debts unless in the circumstance medical debt is not deemed “marital debt”.

Medical debt forgiveness or reduction is possible through various means. Some medical providers offer financial assistance programs or charity care for patients who are unable to pay their medical bills.

Additionally, individuals facing overwhelming medical debt may explore settlement or negotiation options with healthcare providers or medical debt relief organizations. However, forgiveness is not guaranteed, and it typically depends on the specific circumstances of each case.

Regardless of your medical debt, you are not alone. There are resources available to you and your family. Marine Credit Union’s mission is to advance the lives of people from a place of financial need to a life of ownership and giving back to our communities. If you feel you are in need of ANY financial assistance, contact us today and you will be connected with one of our financial professionals.

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